Can I claim GST on second hand goods?
Can I claim GST on second hand goods?
Understanding GST on second-hand goods can be a bit tricky because there are special rules for purchases from non-GST-registered sellers.
In short, the answer is yes, you can claim GST on second hand goods, although there are a number of requirements.
Before we dig into the details, let's take a look at the initial requirements.
Firstly, the goods must be purchased for business use, not personal use.
Secondly, the second-hand goods must be GST-able, meaning they are not GST exempt or input-taxed.
Thirdly, you must claim the GST input tax credits in the correct period using your accounting basis (cash or accrual).
How much GST can I claim?
How much GST can I claim?
The amount you can claim depends on the value of the second-hand goods you purchased.
$300 or less:
The amount of GST you can claim is 1/11th of the purchase price, for example if you purchased an office desk for $220, the GST input tax credit is $20 ($220 / 11)
Above $300:
The amount of GST you can claim the lesser of 1/11th of the purchase price, or the GST payable if you resold the second-hands goods.
This is to stop people from overstating the value of the second-hand goods and claim a larger GST input tax credit.
As an example, let's say you purchased a car for $22,000, but the actual market value was $16,500, you can only claim 1/11th of the marketing value, being $1,500 ($16,500 / 11)
What documentation do I need?
What documentation do I need?
Even though goods are second hand, you still need proof of purchase. You need documentation as this ensures compliance and substantiates the GST claim if audited.
If you are purchasing from another business, they will need to issue you a tax invoice.
If you are purchasing second hand goods from an individual or another non-business entity, you need the following:
Supplier’s name and address.
Description and quantity of goods.
Date of the acquisition
Consideration for acquisition.
There is an exemption for low-value acquisitions under $50, where simplified records are acceptable for attribution purposes.
Following these rules helps ensure that your GST claim on second-hand goods is compliant with ATO guidelines.